Steve Dandurand is a tax preparer with Jackson Hewitt and works out of its Warwick location. He has more than 20 years of tax preparation experience and has worked for Jackson Hewitt for six years.
PBN: Items like unemployment benefits and state and federal grants have long been subject to taxes, but that seems particularly relevant this year given the number of relief programs and participation in unemployment benefits. How would you advise taxpayers to approach these issues when filing their 2020 taxes?
DANDURAND: It’s extremely important for taxpayers to seek a tax professional to determine what is best for their situation and to determine if they qualify for tax credits, especially this year with the enhanced unemployment benefits and other grants as many grants are not taxable.
For those who made less in 2020 than in 2019, the IRS is allowing taxpayers to use 2019 earned income to determine certain tax credits, including the Earned Income Tax Credit, which is one of the most valuable credits and can be worth up to $6,660 to qualifying taxpayers. Again, due to the complexity of the tax law, it benefits taxpayers to seek the assistance of a tax professional at Jackson Hewitt.
PBN: How should taxpayers handle stimulus checks? Do they include those on their filings?
DANDURAND: Although stimulus checks are not taxable income, taxpayers should seek a tax professional’s help to see if they are due more money and qualify for the Recovery Rebate Credit. Taxpayers do not need to complete any information about the Recovery Rebate Credit if they received all of their stimulus in 2020 – the $1,200 ($2,400 if married filing jointly for 2020), plus $500 for each qualifying child and the additional $600 per person in the second stimulus.
PBN: What are the biggest myths and misunderstandings surrounding 2020 tax filings?
DANDURAND: Here are the top [myths]:
- Myth: If you cannot afford to pay your taxes, you should not file. Reality: You should file a return and if you cannot afford to pay the taxes, you may qualify for an IRS Installment Agreement. Failure to pay by April 15 may result in a failure-to-pay penalty. This penalty is applied if at least 90% of your expected taxes due are not paid by the due date – generally April 15. This penalty starts at 0.5% of unpaid taxes each month, and it also caps out at 25%.
- Myth: No income or low income means you don’t have to file. Reality: Depending on the type of income – seniors, students, and other – taxpayers may be required to file or may qualify for additional tax credits and must file to get them. This also helps someone from stealing your information and filing a tax return on your behalf.
- Myth: Filing a tax return is optional. Reality: Filing your taxes is required by the federal tax code for most adults who earn income. In some circumstances, taxpayers who earn extremely low income may be exempt, but that is very rare, and they should still seek a tax professional for help.
- Myth: You can deduct home office expense because you worked from home during the pandemic. Reality: Most do not qualify; only taxpayers who are self-employed or have farm activity may qualify for home office expense. Taking the benefit without other matching tax information can create a red flag in the IRS’ system. A taxpayer must be self-employed or have a home-based business to claim the home office tax deduction. Anyone who isn’t, cannot claim the deduction and could be flagged and receive a notice from the IRS requesting more information, or worse – an IRS audit.
PBN: What other tips or advice would you give to taxpayers this year?
DANDURAND: With all the changes this year, the biggest advice I can share is for taxpayers to stay informed on all the tax changes and file early, if they haven’t already. It’s also important to schedule an appointment with a tax professional to learn about your unique situation because taxes are unique to everyone’s situation.
PBN: Are there any instances in which you would advise against filing a tax return, or waiting longer?
DANDURAND: There are very few instances when a client should not file a tax return. Those that might would be extreme low income and even then, it is in their best interest to seek a professional to determine if they qualify for earned income credits. In most cases, the longer a client waits, the longer it will take for their refund to be processed.
Nancy Lavin is PBN staff writer. You may reach her at Lavin@PBN.com.
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